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590 10

Chapter 15, 16, 18

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590 10

  1. 1. Chapter 15
  2. 2. Chapter 15 Mortgage Calculations
  3. 3. What would you rather have?
  4. 4. What would you rather have? 1,000 in 5 years
  5. 5. What would you rather have? 1,000 in 5 years or
  6. 6. What would you rather have? 1,000 in 5 years or 2,000 in 10 years?
  7. 7. What would you rather have?
  8. 8. What would you rather have? Years 5 10
  9. 9. What would you rather have? Years 5 10 FV 1,000 2,000
  10. 10. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09
  11. 11. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09 20% 401.88 323.01
  12. 12. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09 20% 401.88 323.01 Depends on the discount rate
  13. 13. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09 20% 401.88 323.01 Depends on the discount rate
  14. 14. What would you rather have? Years 5 10 FV 1,000 2,000 10% 620.92 771.09 20% 401.88 323.01 Depends on the discount rate
  15. 15. Five Characteristics
  16. 16. Five Characteristics payment amount & frequency
  17. 17. Five Characteristics payment amount & frequency loan balance
  18. 18. Five Characteristics payment amount & frequency loan balance lender’s yield (IRR)
  19. 19. Five Characteristics payment amount & frequency loan balance lender’s yield (IRR) effective borrowing cost
  20. 20. Five Characteristics payment amount & frequency loan balance lender’s yield (IRR) effective borrowing cost present value of the debt
  21. 21. Loan Balance
  22. 22. Loan Balance calculate the present value of the remaining payments
  23. 23. Loan Balance
  24. 24. Loan Balance 100,000 at 30 years at 10%
  25. 25. Loan Balance 100,000 at 30 years at 10% PMT 10,607
  26. 26. Loan Balance 100,000 at 30 years at 10% PMT 10,607 After 10 years?
  27. 27. Loan Balance 100,000 at 30 years at 10% PMT 10,607 After 10 years? 20 years at 10% at 10,607
  28. 28. Loan Balance 100,000 at 30 years at 10% PMT 10,607 After 10 years? 20 years at 10% at 10,607 PV 90,303
  29. 29. Lender Yield (IRR)
  30. 30. Lender Yield (IRR) 100,000 at 30 years at 10%
  31. 31. Lender Yield (IRR) 100,000 at 30 years at 10% PMT 10,607
  32. 32. Lender Yield (IRR) 100,000 at 30 years at 10% PMT 10,607 Points 5,000
  33. 33. Lender Yield (IRR) 100,000 at 30 years at 10% PMT 10,607 Points 5,000 95,000 at 30 years at 10,607
  34. 34. Lender Yield (IRR) 100,000 at 30 years at 10% PMT 10,607 Points 5,000 95,000 at 30 years at 10,607 i = 10.63%
  35. 35. Chapter 16
  36. 36. Chapter 16 Commercial Mortgages
  37. 37. Commercial vs. Residential
  38. 38. Commercial vs. Residential more risk
  39. 39. Commercial vs. Residential more risk shorter terms
  40. 40. Commercial vs. Residential more risk shorter terms higher down LTV
  41. 41. Commercial vs. Residential more risk shorter terms higher down LTV non-recourse
  42. 42. Commercial Loans
  43. 43. Commercial Loans Construction Loan Permanent Loan
  44. 44. The Note
  45. 45. The Note payment amount and timing penalties for late payments insurance maintenance default
  46. 46. Interest Only
  47. 47. Interest Only pay only interest
  48. 48. Interest Only pay only interest pay principal balance at maturity
  49. 49. Interest Only pay only interest pay principal balance at maturity
  50. 50. Interest Only pay only interest pay principal balance at maturity “bullet loan”
  51. 51. Interest Only pay only interest pay principal balance at maturity “bullet loan”
  52. 52. Balloon Mortgage
  53. 53. Balloon Mortgage amortize over 25-30 years
  54. 54. Balloon Mortgage amortize over 25-30 years maturity 5-15 years
  55. 55. Balloon Mortgage amortize over 25-30 years maturity 5-15 years
  56. 56. Balloon Mortgage amortize over 25-30 years maturity 5-15 years must be prepared to payoff loan at maturity
  57. 57. Balloon Mortgage amortize over 25-30 years maturity 5-15 years must be prepared to payoff loan at maturity
  58. 58. Ratios
  59. 59. Ratios LTV - loan to value ratio loan ÷ value DCR - debt coverage ratio NOI ÷ debt service
  60. 60. DCR
  61. 61. DCR 1.3 to 1.5
  62. 62. DCR 1.3 to 1.5 how much NOI is there available to make the debt payment?
  63. 63. DCR 1.3 to 1.5 how much NOI is there available to make the debt payment? cushion to cover
  64. 64. DCR 1.3 to 1.5 how much NOI is there available to make the debt payment? cushion to cover
  65. 65. Chapter 18
  66. 66. Chapter 18 Investment Decision Ratios
  67. 67. Yield Analysis
  68. 68. Yield Analysis How can you improve yield? ! Leverage
  69. 69. Two Elements
  70. 70. Two Elements Equity - owner
  71. 71. Two Elements Equity - owner Debt - lender
  72. 72. Yield Analysis
  73. 73. Yield Analysis Purchase Price 1,000,000
  74. 74. Yield Analysis Purchase Price 1,000,000 NOI 100,000
  75. 75. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0%
  76. 76. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0% Loan 750,000
  77. 77. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0% Loan 750,000 Years 30
  78. 78. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0% Loan 750,000 Years 30 Rate 8.0%
  79. 79. Yield Analysis Purchase Price 1,000,000 NOI 100,000 Overall Rate 10.0% Loan 750,000 Years 30 Rate 8.0% Payment 66,621
  80. 80. Yield Analysis
  81. 81. Yield Analysis
  82. 82. Yield Analysis Value
  83. 83. Yield Analysis Value NOI
  84. 84. Yield Analysis Value NOI Rate
  85. 85. Yield Analysis Total Value NOI Rate
  86. 86. Yield Analysis Value NOI Rate Total 1,000,000
  87. 87. Yield Analysis Value NOI Rate Total 1,000,000 100,000
  88. 88. Yield Analysis Value NOI Rate Total 1,000,000 100,000 10.0%
  89. 89. Yield Analysis Debt Value NOI Rate Total 1,000,000 100,000 10.0%
  90. 90. Yield Analysis Value NOI Rate Debt 750,000 Total 1,000,000 100,000 10.0%
  91. 91. Yield Analysis Value NOI Rate Debt 750,000 66,621 Total 1,000,000 100,000 10.0%
  92. 92. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Total 1,000,000 100,000 10.0%
  93. 93. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Equity Total 1,000,000 100,000 10.0%
  94. 94. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Equity 250,000 Total 1,000,000 100,000 10.0%
  95. 95. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Equity 250,000 33,379 Total 1,000,000 100,000 10.0%
  96. 96. Yield Analysis Value NOI Rate Debt 750,000 66,621 8.9% Equity 250,000 33,379 13.4% Total 1,000,000 100,000 10.0%
  97. 97. Excel Yield Analysis
  98. 98. Effective Gross Income Multiplier
  99. 99. Effective Gross Income Multiplier Price ÷ EGI
  100. 100. Operating Expense Ratio
  101. 101. Operating Expense Ratio Expenses ÷ EGI

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